Utah's fraud 'epidemic': Victims share anger, embarrassment, hurt – Deseret News

Editor’s word: This is the primary in a two-day take a look at the continued drawback of affinity fraud in Utah, and the push for options.

SALT LAKE CITY — Linda Garfield watched her boss’ son develop up at Andrews & Co. on Main Street in Nephi, the place she labored as a secretary for 32 years.

Because his mom was typically sick, Tom Andrews spent loads of time as a younger boy on the workplace the place his father, Earl, ready tax returns for many individuals within the small Juab County city. Garfield typically taken care of the boy as his dad labored.

Linda Garfield, of Mona. | Scott G Winterton, Deseret News

“He considered me his mother,” Garfield stated seated on the sofa in her residence in Mona.

Andrews took over the enterprise from his father, servicing his tax shoppers and in addition arranging investments for them and others.

Garfield, 69, and her husband Rex, 75, an AT&T microwave radio installer for 32 years, have been amongst them. Andrews did their taxes and arrange their solely funding account utilizing proceeds from the sale of the household farm in 2002.

And then he raided it — $273,000 gone. It was every part that they had.

“He was just a like a bloodsucker,” Rex Garfield stated.

“You think you know people …,” Linda Garfield added.

Though his personal secretary stated he had hassle including and spelling, Andrews, 40, used his lengthy-standing friendships and personable demeanor to steal $9 million from his shoppers, together with docs, legal professionals, businessmen, mother and pop store house owners — even the previous Nephi police chief — till he was caught final fall.

At Andrews’ urging, the Garfields rolled their cash into one other firm — as that they had finished a number of occasions on his recommendation to get a greater return — this time Jackson National Life Insurance Co., a good agency that gives annuities.

Only when it got here time for the switch, the cash wound up within the Garfields’ account at Wells Fargo Bank.

Not to fret, Andrews informed the couple. He went with Rex Garfield to the financial institution the place he helped him get a verify for $273,000 made out to Jackson Trust. Little did Garfield know that Jackson Trust was pretend and solely the identify of an account Andrews opened at Cyprus Credit Union. The Garfields’ cash by no means went to the actual Jackson firm. It went straight to Andrews.

That state of affairs performed out for at the least two dozen individuals who did enterprise with Andrews.

Andrews pleaded responsible to securities fraud and mail fraud in a cope with federal prosecutors who will advocate that he spend 4 to 5 years in jail. He is scheduled to be sentenced Nov. three. His lawyer, Greg Skordas, declined an interview request.

Fraud capital

This story is not uncommon in Utah. It occurs all too typically, fueling the state’s fame because the fraud capital of the United States. People will exploit their shut private relationships, whether or not it is in enterprise or extra possible via neighborhood or spiritual associations.

Though generally referred to as “affinity fraud” it is not likely a kind of fraud. It’s extra of a approach for con artists to market their scams to individuals of their communities.

“It’s out of whack,” stated Utah U.S. Attorney John Huber. “Utah is out of whack in the proportion of white-collar fraud that we have compared to other states. And that’s recognized throughout the country.”

Utah Attorney General Sean Reyes calls it “rampant.” He has additionally used the phrase “epidemic” to explain what’s occurring within the state, and that’s regardless of aggressive efforts to prosecute criminals and educate an unsuspecting public.

The Utah Securities Fraud Task Force — comprised of 10 federal, state and native businesses — calculated that four,400 victims misplaced $1.four billion to funding fraud in Utah based mostly on the instances beneath investigation in 2010. It recognized 370 potential perpetrators.

The company hasn’t up to date these numbers, however FBI supervisory particular agent Mike Pickett, who heads the white-collar unit within the Salt Lake area workplace, estimates the annual greenback quantity now exceeds $2 billion.

“It’s a scary huge number,” he stated.

The variety of Utah victims in the present day is not straightforward to calculate, Pickett stated. One present case alone involving Curtis DeYoung, who stole $24.9 million in retirement funds over 16 years, has greater than 5,000 victims inside and out of doors the state. DeYoung, of Draper, pleaded responsible to mail fraud in September.

In 2010, the FBI ranked Salt Lake City fourth within the nation amongst Ponzi scheme scorching spots. Marquet International, a enterprise investigation agency, positioned Utah at No. 5 for what it referred to as a “Ponzi propensity ratio” in 2011.

So far in 2016, federal legal instances have totaled $59.three million in losses, in accordance with the U.S. Attorney’s Office.

The state stays within the prime 5 when it comes to investigations, indictments, prosecutions and sentences, Pickett stated. The Salt Lake FBI workplace, which incorporates Idaho and Montana, works about 75 instances a yr.

But these two states do not have close to the affinity fraud drawback that Utah has, based on Pickett.

It’s onerous to pinpoint how Utah got here into its ignominious distinction.

Keith Woodwell, Utah Division of Securities director, traces it again to the proliferation of penny inventory fraud within the 1980s. Many dealer-supplier companies concerned within the scandal have been based mostly in Utah. Penny shares are small, thinly traded corporations usually traded “over the counter” relatively than in markets such because the New York Stock Exchange.

Though the business has largely gone away, the label it held on the state has caught.

The listing of multimillion greenback scammers in Utah is lengthy. Val Southwick, Shane Baldwin, Travis Wright, to call a couple of, swindled quite a few individuals out of hundreds of thousands of exhausting-earned paychecks, life financial savings and retirement funds.

The three of them are in jail. But different scams are happening on a regular basis.

“We think there are a whole bunch out there percolating,” stated Mark Pugsley, a Salt Lake lawyer who represents white-collar crime victims.

The Mormon angle

Some of them prey on members of their very own religion, sometimes The Church of Jesus Christ of Latter-day Saints, the predominant faith in Utah.

“Let’s talk frank. The LDS community is what we’re talking about. There’s predators in sheep’s clothing in our local congregations, and they will take advantage of their neighbors that trust them,” stated Huber, a former LDS stake president.

Southwick, for instance, confirmed or talked about his LDS Church temple advocate to potential buyers. He adorned his workplace with what investigators described as Mormon “memorabilia” to breed a way of belief. He had unwitting LDS missionaries come by his workplace when he was there with buyers.

Kaysville insurance coverage agent Dee Randall performed on his LDS Church membership to win over buyers in a $72 million Ponzi scheme. He used advertising supplies explicitly designed to attraction to Mormons by focusing closely on the biblical idea of the “abundant life,” in accordance with courtroom paperwork.

What made the rip-off distinctive is that Randall informed new buyers up entrance that he deliberate to make use of their cash to pay earlier buyers and warned them to not put in cash they could not afford to lose.

Woodwell stated that disclosure does not make a Ponzi scheme legal. Randall, 65, just lately pleaded responsible to 4 counts of securities fraud and one rely of sample of illegal exercise in state courtroom. He is scheduled to be sentenced on the felony costs in February.

Most of Lori Ann Anderson’s victims have been members of her LDS Church stake in Logan. She shaped a buying and selling membership named S.M.T.S. that allowed her to pool the cash of buddies who invested together with her for day buying and selling in Apple inventory.

Anderson, 54, advised her buyers that she made returns of 10 % a yr and by no means had a dropping day. Investors, based on the state securities division, weren’t chosen at random.

“Lori Ann had an uncanny way of drawing people quickly into her inner circle of friends,” Dallas and LeAnn Holmes advised a decide previous to Anderson’s sentencing in May. Anderson invited the Holmeses and others to her LDS temple marriage “while solidifying their trust and belief in her integrity,” in accordance with a letter the couple wrote the decide.

Anderson, who hung out in jail in 1992 for defrauding insurance coverage shoppers, admitted mendacity to buyers, telling them she was making a living when she was in truth dropping it. She additionally admitted to displaying buyers false earnings on a software program program she bought for her pc.

Only about $40,000 of the $1.7 million she raised from greater than 70 individuals remained when investigators questioned her in July 2015.

“Affinity fraud continues to be probably the most damaging white-collar crime the place fraudsters not solely steal the nest eggs of Utah victims however destroy their trusting nature as properly,” Woodwell stated after Anderson was despatched to jail for as much as 30 years.

Scammers, although, take far more than individuals’s cash.

Beyond misplaced money

Rex and Linda Garfield fell into melancholy that required medicine after studying of their losses. Their stomachs have been upset. They continually frightened about how the would make their home cost and meet different bills. The bought their journey trailer and 4-wheeler. They do not exit a lot. Buying Christmas presents for his or her three grandchildren and three nice-grandchildren is hard.

And then their daughter, Michelle Farley, unexpectedly died in February from a uncommon sickness referred to as acute respiratory misery syndrome, a situation that forestalls sufficient oxygen from attending to the lungs and into the blood.

Her demise and the lack to assist their son-in-law with the medical payments additional weighed on the Garfields. All Linda Garfield needed to do was sleep.

“It’s been a bad year,” she stated.

Another sufferer of Andrews, Suzanne Rengers, stated she feels weak and uncovered, to not point out “kind of dumb” for being so trusting and never seeing a number of the issues that perhaps she ought to have. It left her just a little extra skeptical, a bit extra cynical.

Frank Arnold Horton and his daughter, Suzanne Rengers. | Nick Wagner, Deseret News

“It definitely changed how I view people, how you trust people,” she stated. “You want to be trusting. You want to have that faith in people. It’s hard when you see someone taking advantage of your father, your parents and other people, and yourself.”

Like different victims, Rengers’ father, Frank Horton, thought-about Andrews a great good friend through the years that did his taxes. Andrews even as soon as did Horton’s son’s taxes without spending a dime.

But what galls his daughter, who additionally misplaced cash within the bogus Jackson Trust, is that Andrews took benefit of her father when he was most weak.

Horton, a retired heavy gear operator, and his spouse, Kathleen, had their very own IRAs, however no funding expertise. Looking for protected funding for emergencies and dying advantages, Horton went to Andrews. He endorsed the Hortons to roll their IRAs right into a Hartford annuity, which they did.

And then Kathleen Horton died in May 2015.

Horton once more sought Andrews for tax recommendation. At that assembly, Andrews really helpful Horton transfer his cash to the pretend Jackson Trust. He wrote a $43,000 verify. Horton later acquired a phony assertion displaying $102,000 within the account. He now has no retirement financial savings.

“To me that was just despicable,” stated Rengers.

Horton stated it hurts as a result of he thought Andrews was such a superb pal and “he turns around and hits you in the mouth like that.” He additionally blames himself for getting his daughter concerned with Andrews.

Rengers, who was recognized with a number of sclerosis in 2012, misplaced about $15,000 to the Jackson Trust. At age 54, she has needed to begin her retirement financial savings from scratch.

Sallie and Bill Rawlings

Always smiling and outgoing, Tom Andrews got here throughout as Baby Huey, the large, naïve cartoon duckling. He appeared like a cheerful doofus. He hung his head and was all the time saying he was sorry for this or sorry for that. There was some “woe is me” in his mannerisms. He sought shoppers’ recommendation for his private life. He sat of their dwelling rooms.

Turns out Linda Garfield wasn’t the one individual he thought-about his mom. He informed the Rawlings they have been like a mom and father to him. And that, Sallie Rawlings stated, is how he reeled individuals in.

“Boy, did I read him wrong,” she stated.

Earl Andrews, earlier than he went to jail, and later Tom Andrews did Bill and Sallie Rawlings’ enterprise and private taxes for about 20 years. Tom Andrews helped the Rawlings roll their IRA and 401Okay right into a authentic annuity. Later he advised them they might get a greater price of return with Jackson National Life Insurance Co.

Tom Andrews gave them DVDs, brochures and quarterly statements that seemed to be from Jackson.

“There was nothing that made us feel that was not right,” Sallie Rawlings stated.

Last fall, the Rawlings did not get a quarterly report from Jackson. Sallie Rawlings referred to as the agency together with her account quantity. After being on maintain for a very long time, the individual on the opposite finish stated, “I hate to tell you this …”

Rawlings stated she knew instantly what was coming subsequent: Jackson didn’t have an account for the Rawlings.

“It’s just like your heart goes to the bottom of our stomach, and the floor goes out from under you,” she stated.

They misplaced $675,000.

Only later did they study the pretend Jackson Trust supplies have been reduce and pasted from the actual Jackson firm and mailed from a vacationing Andrews in California to lend them credibility.

Chad Bowles

Retired Nephi Police Chief Chad Bowles, 64, has recognized Earl and Tom Andrews his whole life. Earl Andrews did his taxes for years, and his daughter and Tom Andrews have been associates rising up.

Former Nephi Police Chief Chad Bowles. | Scott G Winterton, Deseret News

Bowles truly put Earl Andrews, the daddy, in jail for forcible sexual abuse and lewdness with a toddler in 2005. He did not see that as a mirrored image on Tom Andrews and even felt sorry for what he needed to undergo due to his father.

With the elder Andrews behind bars, Bowles turned to his son to maintain his taxes. He described Tom Andrews as a great child who was by no means in hassle. He all the time had a smile on his face, appreciated to speak and even referred to as Bowles for recommendation when he was going via a divorce. He was extra Bowles’ pal than his accountant.

Bowles put away just a little retirement financial savings every month over his profession. It totaled $170,000. He ultimately turned it over to Tom Andrews, hoping to earn some curiosity. He had no approach of figuring out his cash did not go to a cash administration agency however straight to Andrews’ credit score union account.

When some paperwork did not arrive as promised, Bowles referred to as Andrews, who sounded nervous and did not need to speak. Follow-up calls to the often responsive Andrews out of the blue went unanswered. Bowles turned to a law enforcement pal who advised him Andrews was in huge hassle.

“I knew I’d lost it then,” the previous chief stated.

Andrews fooled everybody, he stated. “There’s a lot of people sitting back in awe thinking, ‘How could he do that?'”

Bowles stated it hurts, however he’ll be all proper.

“You hear about this stuff on the news and you think, ‘Poor dumb buggers. How can they be so stupid?'” he stated. “Then the next thing you know, you’re the one that’s stupid.”

Steve Blaser

Steve Blaser, 72, constructed his fortune being a savvy investor, figuring out when to purchase and when to promote. He made cash and he misplaced cash over the course of his profession. And he had it stolen from him.

The Bountiful man took an immediate liking to the younger man his son labored for at Silver Leaf Financial. Shane Baldwin was sharp, personable, clear-minimize.

“A kid that you’d say, ‘I’d really like my son to be like him,’ just really dynamic, a go-getter, but he didn’t know the difference between a truth and a lie,” Blaser stated.

Baldwin purchased and bought distressed properties that fell into default through the 2008 monetary disaster. He promised buyers huge returns on the offers.

Blaser flew to Florida to take a look at a condominium complicated. He had his title firm do it due diligence. He invested. It paid off handsomely.

“Over a period of time, Shane just kept going to get bigger and bigger projects and just thought that he could never make a mistake because the early ones were hitting and making money,” he stated.

Blaser did extra offers with Baldwin, some made cash and a few did not. But then Blaser caught him in a lie on a North Salt Lake property. Baldwin tried to offer him a cast doc.

Blaser ended his enterprise relationship with Baldwin then and there, however not earlier than he misplaced “millions” of dollars. He will not say how a lot.

Baldwin wooed buyers with quite a few lies, together with misrepresenting anticipated returns. He informed one he was investing $2 million in an asset buy however by no means did. He informed others he had a purchaser for an asset however not one of the buyers have been repaid their preliminary funding. Baldwin used $1 million of investor cash on private bills, together with an airplane.

In all, he took buyers for $14 million. He’s now serving as much as 60 years in jail.

Blaser stated it isn’t dropping cash that makes him mad, it is the best way he misplaced it.

“If Shane had stayed honest, he would have succeeded far beyond his wildest dreams. But he couldn’t stay honest. He could not tell the truth. And the more that happened to him, the further he’d get away from recognizing the truth and what the truth was,” Blaser stated.

Coming tomorrow: How to guard your self from the “silver-tongued devils” of affinity fraud.

Email: romboy@deseretnews.com

Twitter: dennisromboy; DNewsCrimeTeam

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